Randall & Quilter Investment Holdings plans to merge its wholly owned subsidiary, Sandell Re, with Tradesman Program Managers in return for a 35% interest in the combined entity.
The initial book value of R&Q’s interest in the combined business will be $43.4 million, which is equal to the estimated book value of Sandell at completion.
Proforma pre-tax earnings of the combined business for full year 2020 are estimated to be $17.2 million.
Ken Randall and Stewart Ritchie will be joining the board of the newly combined business as representatives of R&Q.
Tradesman is a New York based Managing General Agent (MGA) that underwrites construction-related liability insurance known as the ARTISAN Contractors’ General Liability insurance program through insurance policies which are issued by R&Q’s subsidiary, Accredited Surety & Casualty Company Inc.
Sandell was acquired by R&Q in October 2019 for $25 million and has been one of the reinsurers of the ARTISAN Contractors’ General Liability program since it incepted in 2017.
At the end of 2019, Sandell Re had total assets of $116.7 million and incurred a loss for the year of $1.3 million after making a $3 million provision against third party loans and strengthening reserves on acquired legacy portfolios by $2.6 million.
Following the completion of the transaction R&Q will deconsolidate Sandell and reflect its 35% equity interest in the enlarged Tradesman Group on its balance sheet.
“This is a fantastic deal for both parties,” said R&Q Executive Chairman Ken Randall. “It enables the Group to acquire a significant and valuable minority interest in a fast-growing New York based Managing General Agent which will be immediately accretive to the Group’s post tax earnings”
Randall further noted that the transaction would secure ongoing program management fees for Accredited, reduce R&Q’s live underwriting risk exposure from the ARTISAN program, and demonstrate the effectiveness of the group’s legacy acquisition strategy.
“For the owners of Tradesman, it provides access to the expertise and management within the R&Q Group, facilitates participation in the profitable underwriting results from the Tradesman Program and creates alignment with the risk assumed by the reinsurer panel,” he added.
“The growth of Tradesman’s ARTISAN Program has, and will continue to be, a tremendous driver of value both for Accredited’s fee-based program management business and through our strategic minority interest in the Sandell risk carrier,” Randall continued.
“We strongly believe that this partnership with Tradesman and, in due course with other Managing General Agents, will help us to deliver exceptional results for our shareholders, agents and reinsurers.”
Daniel Hickey Jr., CEO of Tradesman Program Managers LLC, also commented: “We are thrilled to partner with R&Q on this transaction which aligns the interests of Tradesman and R&Q in the development and growth of Tradesman’s business and programs, Accredited’s US program management business and Sandell Re as one of our reinsurance panel members.”
“R&Q, through Accredited Surety & Casualty have been great partners in the growth of our program since inception and we look forward to continued success going forward.”